The Reserve Bank of India has amended its Small Finance Banks credit directions to allow small finance banks to lend to Infrastructure Investment Trusts registered with and regulated by the Securities and Exchange Board of India. The permission applies only to listed InvITs and requires at least 80 per cent of InvIT asset value to be invested in completed, revenue-generating infrastructure projects that have generated positive operating cash flows for at least one year. Banks must adopt a board-approved lending policy covering appraisal, debt service coverage ratio benchmarks, exposure limits, monitoring and valuation assumptions, and must confirm that the legal structure of the InvIT allows borrowing and enforcement of security. The rules bar use of bank funding to support financially troubled underlying special purpose vehicles, to acquire equity in other entities, or to refinance anything other than existing credit facilities for completed projects that have commenced commercial operations. Overall InvIT leverage must remain within the ceiling set by SEBI or a lower internal limit, and aggregate exposure of all banks to the InvIT and its underlying special purpose vehicles or holding companies cannot exceed 49 per cent of InvIT asset value. Lending must be fully secured through project asset charges, cash flow assignments and pledges of special purpose vehicle equity, with escrow and other lender protection clauses, and generally cannot use bullet or ballooning principal repayment structures except for exposures held through bonds, debentures and commercial paper in banks' investment portfolios. The amendments take effect on October 1, 2026, unless a bank adopts them earlier in full. Existing non-compliant InvIT loans may run off to maturity, but cannot be reviewed, renewed or enhanced after expiry unless they comply with the new requirements.
Reserve Bank of India2026-06-10
Reserve Bank of India permits small finance banks to lend to listed InvITs subject to 49 per cent exposure cap
The Reserve Bank of India has amended Small Finance Bank credit directions to permit lending to listed Infrastructure Investment Trusts regulated by SEBI, provided at least 80% of InvIT assets are in completed, revenue-generating projects with positive cash flows for at least one year. The framework mandates board-approved lending policies, leverage and exposure caps, full security and lender protections, and restricts funding for troubled SPVs, equity acquisitions and most refinancing, while generally disallowing bullet or ballooning repayment structures except where InvIT exposures are held as securities. Existing non-compliant InvIT loans may run off to maturity but cannot be renewed or enhanced unless they meet the new requirements.